Unfortunately, Organic Growth is a ‘Must’: Here’s How

Given frothy valuations and unprecedented levels of dry powder, margin enhancement and add-on acquisitions are no longer alone sufficient to generate the returns investors need to maintain their edge. Organic topline growth is a must. But growth is risky. Who knows if that new channel, product, or market will work out. Time is the enemy of IRR, so we do not have a lot of leeway when it comes to trial and error. We need to get it right, and we need to get it right fast.

To make matters worse for B2B portfolio companies, how companies acquire new customers has been uprooted due to two primary factors.

First, COVID has caused many face-to-face networking events to move online or “hybrid.” Sales professionals agree these virtual interactions are not as effective for business development and lead gen as their in-person counterparts.

The second problem is privacy concerns. Buying lists then batching and blasting will get you in trouble. Your email service provider may shut your account down if it suspects too many cold emails. Recipient email systems are smarter about detecting and deleting unsolicited inquires. You may also run into potential regulatory risks, depending on what markets you are in.

The solution? You need to provide enough value that prospects opt in to hear from you.

The approach? Following these steps has led to an 80% reduction in acquisition costs using digital channels, and 50% reduction in sales cycle time because lead gen efforts are finding more qualified prospects.

  1. Segment your market based on use-cases and build more robust “personas” within your TAM.

Saying you target the financial services industry or the middle market or CIOs is a good start but it is no longer sufficient. You must also look within your TAM to find the 3-5 buyer personas who are perfect fits for your product and services because you solve the exact pain points they have.

Across industries, we’ve found 40-50% of accounts in your TAM will never buy from you (or, worse, will buy but be unprofitable customers since they’re not an exact fit). It’s nothing personal. You just are not perfectly aligned. Imagine what you could do by redeploying the waste toward the top 20% of your TAM that is an exact match for your brand.

For a SaaS company, for example, we found three use-case segments, each with unique buying signals. One was interested in the data platform when they were about to embark in diligence for a potential acquisition. Another was interested in the software as part of their annual planning process. The third needed it for quarterly quota setting for their sales team. Obviously, you cannot approach all three of these personas with the same message and value proposition.

To do a proper buyer segmentation, you must combine market research with data science. Making up personas in a brainstorming session with the management team is only 33% accurate. Make the investment to do it right. In conducting a rigorous analysis of your market, not only will you learn about the right use cases, you’ll uncover the precise emotional hooks to get someone to buy, the ideal feature/benefit set, and the optimal price point.

  1. Create “lead magnets” that attract your ideal customers.

This usually is a whitepaper, e-book, webinar, or event that provides a solution to a very specific problem that your target is facing. Give it away for free in exchange for opting in to be contacted by your team. From the example above, we attracted the first segment with a whitepaper called “How to use data to de-risk your next acquisition,” the second one with “Injecting data into your annual planning process,” and the third one with “Optimize your sales coverage model using market data.”

  1. Pay to promote the lead magnet.

Now it’s time to invest in paid media that get the ideal customers in your TAM to raise their hand. Typically, LinkedIn is the best source, but we’ve seen B2B companies have success with other channels such as Facebook, Instagram, and Google. Drive clicks from social media to your own website, where a visitor can download/sign up for your lead magnet in exchange for providing contact info and opting into communications.

  1. Follow up with empathy

Now that you have someone raising their hand and signaling which segment they are in, have your BDRs contact them to qualify them using a series of questions that show your prospect that you understand their pain points, while simultaneously qualifying them. Use a custom question set for each person based on what you learned in the research. For example, for the sales coverage model persona, you can ask questions like

  • How consistent is performance across reps? Do you think the lower performers have skill challenges or are held back by an unfortunate territory assignment?
  • How do you currently set your sales coverage model? What data do you use to do so?
  • What would it be worth to your company if you could move all below-average performers to at least average, using more optimal coverage models?

For this case study, the client realized a 30% increase in sales in the first year of implementing these changes and another 20% on top of that in year two. This was after four years of slowly declining revenue.

Following a science-driven approach like this will maximize the effectiveness of your sales organization, because they are focused on more qualified leads that are able to be sourced at a much lower price than “spray and pray” approaches of the past. Value creation efforts like these have a double benefit: accelerate organic sales growth while reducing risk.

Author: Rob Ristagno (rristagno@lucasgroupinc.com)